Thinking about becoming a Houston real estate agent? Curious what the market is going to look like next year in the Bayou City? Let’s see what the data says!
What Makes the Houston Market Different
There are a lot of things about the Houston market that make it special. For starters, it’s huge: Houston is home to 2.3 million people. It’s the fourth-largest city in the U.S. and the biggest in Texas.
Because Houston is so big, it has options for every kind of buyer. Hip downtown neighborhoods like Montrose and River Oaks draw in buyers looking for a more walkable, urban lifestyle. Tony suburbs like The Woodlands and Sugar Land ring the city with high-priced real estate.
And yet overall home prices are relatively affordable. In 2019, Zillow estimated the average Houston home price to be $190,400.
Houston was named the most diverse city in the nation by the Urban Land Institute in 2019. And though the city has traditionally been fueled by the oil and gas industry, job growth in the healthcare, life sciences, tech, and tourism industry has given the market more ability to weather volatile oil prices.
Of course, Houston is also famously flood-prone, which is sure to become even more of an issue for home buyers as climate change makes the weather more unpredictable.
Big Year-Over-Year Growth in 2019
2019 was a strong year for Houston’s real estate market, with eight consecutive months of growth as of October. 2018 was a record-breaking year for home sales. As of Q4, 2019 was tracking 4.2% ahead of 2018 year-over-year, on pace to break that record again, according to data from the Houston Association of Realtors.
Single-family home sales, total property sales, pricing, total volume, and inventory all increased year-over-year from 2018. The median sale price rose 4.7% from 2018 to $244,000.
According to the Houston Chronicle, properties under $250,000 were the most attractive, drawing both home buyers and investors looking for a flip or a rental.
What does that mean for 2020? It means a strong start. While there is potential for volatility in the coming year, the Houston housing market has a strong base and some serious steam behind it.
Tight Inventory Means a Seller’s Market
In 2019, according to HAR, housing inventory in Houston fluctuated between 3.9 and 4.3 months of supply. Anything under five months is considered a seller’s market, and Houston has been in seller mode for several years now. There’s no reason to think that will change in 2020.
First-time homebuyers, people looking for affordable housing, and investors face an even tighter market. According to the Houston Chronicle, homes priced between $150,000 and $200,000 had the lowest supply, at just 2.2 months.
In 2020, buyers looking for deals are likely to face the most competition, while buyers in a $750,000+ range will see a much looser market.
In October, the Fed cut interest rates for the third time in 2019. Low-interest rates make homebuyers happy. While rates may or may not drop again going into 2020, it looks highly unlikely that rates will rise in the new year.
Low-interest rates should help keep Houston’s market chugging along into 2020.
Falling Oil Prices
Oil prices have been unpredictable, and in the latter half of 2019, fell below 2018 prices. Though Houston has diversified its employer base in recent years, oil money still has a big impact on the housing market.
The Chronicle reports that oilfield service jobs peaked in May and have declined since, indicating a potential slowdown for Houston’s economy into 2020.
Uncertainty, But Optimism
2020 is a year with a lot of question marks attached to it. The results of the U.S. presidential election could have a big impact on markets. Economists have been predicting an economic slowdown for several years that has so far failed to materialize.
Especially in the housing sector, which tends to see a seven-year boom and bust cycles, the market is overdue for a correction: Things have been on an upswing since 2008’s mega-crash. Nobody knows for sure when that correction will happen.
If 2020 is the year the housing market dips, Houston will feel the effects.
In fact, the Urban Land Institute’s 2020 report ranks Houston the lowest of all Texas cities for investment prospects. A slowdown in the market could make it difficult for sub-$200,000 flippers to see a return on their investment (or be able to rent the property for a profit). This has the potential to flood the low end of the market, dropping prices even further. A small dip has the potential to hit Houston harder than other areas.
Between oil prices, investor concerns, and macroeconomic uncertainty, the Houston real estate market in 2020 is anything but a sure thing. And yet falling interest rates and strong year-over-year growth are reasons to be optimistic.
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